Is Lyft going Bankrupt Soon?
There have been a few posts online about the recent state of Lyft. None of them are very good, especially the post from Harry from The Rideshare Guy arguing that Lyft will be collapsing soon.
Here is a short collection of recent events:
- Lyft doesn’t take commission all summer to lower prices while maintaining driver pay
- Lyft cut prices in many markets in September to stay competitive
- Lyft cuts passenger referrals, $10 for new passengers, $5 for referrers
- Lyft halts new driver referral bonuses (but keeps Uber Drivers signing up to Lyft at $500)
- Lyft ends the Driver and College Ambassador Program in some cities, angering current Ambassadors and eliminating one of their income streams
This all points to a company that is losing money and trying to cut their loses to remain a viable company. All startups go through a phase where they lose a ton of money but their actions hint at the future of the company.
I found a list of three ways a company can change to start making money:
- Reducing or eliminating discounts offered only to increase customer base and reach
- Increase in customer loyalty and repeat purchases so the average customer acquisition cost comes down.
- Meeting economies of scale so that costs can be recovered (packaging costs, delivery costs, etc.)
Over the summer and up until this point, Lyft has reduced prices and given out crazy incentives for new passengers to try out Lyft, which would meet point #2 and #3. Now that they deem it to be sufficient, they have moved on to #1 by cutting passenger and driver referral bonuses and pulling back the Ambassador programs in some cities. Unfortunately, all of these actions have angered many of the drivers who are still left.
I believe Lyft is shifting the company to adjust to the new demand and supply of the Lyft system and to position the company to a path to profitability. There are many signs that Lyft is not doing well, but if you compare their actions to the steps needed to take a company to profitability, Lyft seems to be doing all the right things.
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